Last Friday, rating agency A.M. Best assigned a rating of “bbb” to Delphi Financial Group Inc.’s (DFG) latest $250 million, 7.875% senior unsecured notes, with a negative outlook. The ratings of Delphi’s existing debt remain unchanged.
A.M. Best acknowledges Delphi’s low long-term debt to total financial capital ratio, which stood at 19.5% as of Sept. 30, lower than 26.1% at the end of 2008. Though the new issue will pull up the leverage to 20.0X, it had remained lower than the industry average levels.
Fixed charge coverage ratio also stands favorably at 4.60x as of Sept. 30, 2009, up from 3.2x at the end of 2008. Last month, A.M. Best affirmed the financial strength rating of “A” for the company, with a negative outlook.
The current ratings also take into account Delphi’s established presence in niche areas that include small to mid-sized employee benefits and aggregate and specific excess workers’ compensation marketplaces. The group has also been consistently generating favorable operating results.
The net proceeds from this offering will be used for general corporate purposes, including the repayment of $222 million of debt outstanding under Delphi’s existing revolving credit facility.
The negative rating outlook reflects Delphi’s investment philosophy with a high level of concentration in structured assets such as non-agency residential mortgage-backed securities. This asset class has suffered the most recently, leading to above average investment risk and sub par investment performance.
Standard & Poor’s and Moody’s have conferred a “BBB” and “Baa3″ rating on the notes, respectively.
Delphi competes with Conesco Inc. (CNO), Stancorp Financial Group Inc. (SFG) and American Equity Investment Life Holding Co. (AEL).
Read the full analyst report on “DFG”
Read the full analyst report on “CNO”
Read the full analyst report on “SFG”
Read the full analyst report on “AEL”
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